Politically-filtered views on progress against poverty

Like all fields of socio-economic measurement, there is scope for debate on how best to assess development progress. There is often much to be learnt from such debate.

But the debates are not always politically neutral. Some observers chose only to look critically at data and methods when the results diverge from their political priors. And some try to undermine evidence that does not fit their priors by questioning the motives of those producing that evidence. A generous interpretation might construe this as some “postmodern” approach to data, but on closer inspection it often looks more like a debating ploy to make up for weak substantive arguments.

There have been signs of such “politically filtering” amongst some (but certainly not all) of the reactions we have seen to the regularly updated results of the World Bank’s global poverty monitoring efforts.

By way of background, since around 1990 I have led a small team of researchers at the Bank monitoring progress against poverty using household surveys from across the developing world. Our goal is solely to provide an objective assessment of what we know, aggregating the great many household surveys that have been done across the world, each capable of measuring poverty at a specific place and time. (Our latest update draws on 850 surveys across almost 130 countries.) The results have provided the Bank’s official global poverty counts and have been used as the basis for the UN’s Millennium Development Goal (MDG) for poverty, namely to halve the developing world’s 1990 poverty rate by 2015. Our monitoring effort started around 1990, in a background paper for the 1990 World Development Report (WDR), which was devoted to poverty. One of the two international poverty lines used in that paper was about $1 per person per day.

Our latest update indicates that the incidence of extreme poverty has been falling in the world as a whole, despite the recent global crises. Progress has been greater in some regions than in others and many poor people have seen setbacks. But there are clear signs in the data of sustained overall progress for the poorest since the 1990s. In fact we are now confident that the aforementioned MDG for poverty has already been reached.

Politically-filtered critiquesMuch of the debate around our estimates has been constructive and useful. (The volume edited by Sudhir Anand, Paul Segal and Joseph Stiglitz, Debates on the Measurement of Poverty, Oxford University Press, 2010, gives a good and balanced representation of the debate.)

However, there have also been signs of a “political cycle” in the critiques. When our up-dates (at three-yearly intervals) find little (or seemingly modest) progress against poverty, some of our more right-leaning critics come up with some argument as to why we are systematically underestimating that progress. The left-leaning critics are more accepting at these times. By contrast, when we find progress, such critics come up with arguments as to why we are over-stating that progress. We don’t get much critical attention from the right at these times.

Sometimes our motives are impugned and we are accused of political filtering. Critics on the right have argued that the World Bank has deliberately painted a downbeat picture; it is argued that we overstate the extent of global poverty because having more poor people means more development aid, and more work for the World Bank! Surjit Bhalla has been a prominent advocate of this view in the Indian news media and his book, Imagine There’s No Country (published by the Peterson Institute for International Economics in Washington DC, 2002).

Critics on the left have argued instead that we are motivated by an effort to show that economic liberalization and globalization has been poverty reducing. An example is found in a recent article, “Should we Celebrate a Decline in Global Poverty?” by Adam Parsons, who claims that we have “consistently painted an upbeat picture of the global poverty situation.” The reason is plain to him: “The World Bank is the monopoly provider of global poverty figures, and it is no secret that they are often used to support the view that liberalization and globalization have helped to reduce poverty worldwide” and that declining poverty incidence by this measure vindicates “the Bank’s continued defense of neoliberal policies.”

I focus here on the leftist critique, of which the Parsons article is the latest example. (So I am not accused of bias, I also refer readers to my response to Bhalla; see, for example, my article “Fanciful Numbers and Fictitious Intrigues” in the Economic and Political Weekly 2003.)

Should we celebrate a decline in global poverty?Roughly speaking, those on the right are inclined to feel that there is less poverty in the world than we claim, while those on the left think there is probably more. Parsons, for example, feels that our international poverty line of $1.25 a day is too low, leading us “grossly underestimate” the true number of poor people.

This critique rings hollow. From the outset, our approach to measuring poverty globally has explicitly acknowledged that more than one international line can be defended. Rich countries naturally have lower lines than poor ones (even when anchored to the same nutritional requirements). We only claim that $1.25 a day—the average of the actual national poverty lines found in the poorest 10-20 developing countries—is a reasonable minimum line when aiming to measure the incidence of extreme poverty by the standards of poor countries. (A detailed exposition of the choice of this line can be found in a paper I wrote with Shoahua Chen and Prem Sangraula, “Dollar a Day Revisited,” in the World Bank Economic Review, 2009.) The same World Bank sources referred to by Parsons give results for a higher line of $2 a day—the average of the national lines found in developing countries. A technical paper by Shaohua Chen and myself, “The Developing World is Poorer than we Thought, but no Less Successful in the Fight Against Poverty” (in the Quarterly Journal of Economics, 2010) gives results for an even wider range of the lines found in developing countries.

Our use of more than one line is not just buried in the technical papers. The 1990 WDR gave results for two lines, and this has been reasonably common practice since. Even the Bank’s press release on the latest numbers talks about the $2 a day line as well as $1.25 (though giving more attention to the latter).

The key issue is whether the decline in poverty is robust to the choice of poverty line. As we pointed out in the same press release, there also been less long-term progress in reducing poverty by the $2 standard than the lower line, but there has still been progress, especially since 1999.

But is it important to look at the whole distribution to see what is happening. We have also pointed out there has been a huge expansion in the size of the developing world’s “middle class.” (See my paper, “The Developing World’s Bulging (but Vulnerable) Middle Class,” in World Development, 2010.) If one goes to much higher lines, then there is very little sign of progress. I calculate that 96.1% of the population of the developing world lived below the US poverty line, at $13 a day, in 1990, and this had only fallen slightly (to 95.5%) by 2005. Over the same period, the proportion living below $2 a day fell from 65% to 47%. So there was a huge expansion in the share living between $2 and $13 a day.

Our research has made considerable effort to provide robustness tests to numerous changes in measurement assumptions and data sources—addressing the concerns of our more substantive critics. Precise numbers change of course, but the overall trends of falling poverty incidence are robust across a wide range of the poverty lines found in developing countries. The trends are also robust to different methods of constructing the purchasing power parity exchange rates we use to allow for the fact that many goods and services are cheaper in poor countries (as shown in the aforementioned paper with Chen).

The morality of a poverty lineMorality issues have also been brought into the debate. Parsons tries to make a moral argument against using the $1.25 a day line: “By setting the MDG target to a universal poverty line of $1.25 (a day) we imply that it is morally acceptable for people to live at this level of income, so long as they don’t fall below it.”

This is a surprising claim indeed. I really doubt if anyone who has used the $1.25 a day line (or prior “$1 a day” line, based on old and out-dated data) thinks it is “morally acceptable” as long as nobody lives on less than this frugal sum. Nor is it imaginable that the UN thinks it is “morally acceptable” as long as no more 20% or so of the developing world’s population lives under $1.25 a day, as implied by their MDG for poverty.

Rather, it is plain that we focus on extreme poverty because we give the circumstances of the world’s poorest people the highest weight in assessing overall development progress. We need not focus solely on those living below $1.25 a day, but we must surely give them higher priority for our poverty monitoring efforts than those more fortunate. That is the only morally acceptable position.

Monopoly provider?The “monopoly provider” claim is no less surprising. Here Parsons is repeating a claim found amongst our critics on both the left and the right. I grant that this had some validity 10 years ago. However, for many years now, we have made all the data on which our calculations are based publically available through the PovcalNet web site. This is designed to not only replicate our calculations in a transparent way but to also allow users to change the assumptions underlying those calculations, including the poverty line.

So if the Bank is acting like a “monopoly provider” then it is clearly very bad at it, since it makes its poverty data available to anyone at zero cost! And the team in the research department has helped literally thousands of users in accessing these data. (PovcalNet has about 3 million active visits per year, including multiple visits by the same users. All these users are making their own calculation using PovcalNet.)

Defenders of the faith?Along with some other critics on the left, Parsons reads our numbers as a World Bank defense of its “neoliberal policies”?

It might be surprising then that the publications documenting our findings do not make any claims about what role has been played by policies, or what might have happened under alternative policies. Nowhere in the source documents on the global poverty monitoring task will one find any claim about the role played by such policies or by “liberalization and globalization.” If our motive was to defend these policies then surely we would have at least pointed in that direction.

Granted, the Bank’s researchers have participated in the public debate on the role of economic reform and globalization in the fight against absolute poverty, often using these data. So too have many non-Bank researchers. But you will find a broad range of published views amongst the Bank’s researchers—not unlike the range of views seen in the development community as a whole.

In truth, the policy interpretations given by some of our critics are yet another form of their own political filtering. Some people just don’t want to accept that the living standards of the poorest could evolve over time in any way contrary to what their political beliefs would appear to dictate.

In conclusionOpen scholarly debate on important measurement issues in assessing development progress is to be welcomed. Alas that is not the only form of debate one sees. Some have opted instead for politically-filtered views of the evidence. When that evidence might be seen to challenge their own views they accuse those producing it of being politically or economically motivated—that they are only aiming to validate their own prior policy positions, or even to keep themselves in jobs! These claims are preposterous in the context of the World Bank’s global poverty monitoring efforts.

There is still a long way to go to turn our shared dream of a world free of extreme poverty into a reality. Over one billion people still live on less than a meager $1.25 a day. But all those who genuinely care about fighting poverty in the world should celebrate the latest news that the number has been falling.

Comments

Open scholarly debate on important measurement issues in assessing development progress is to be welcomed. Alas that is not the only form of debate one sees. Some have opted instead for politically-filtered views of the evidence. When that evidence might be seen to challenge their own views they accuse those producing it of being politically or economically motivated—that they are only aiming to validate their own prior policy positions, or even to keep themselves in jobs! These claims are preposterous in the context of the World Bank’s global poverty monitoring efforts.
I would not have written this piece better than this conclusion.Thumbs up!!!!

The fact that the Bank's method shows extreme poverty declining around the world indicates that the incomes of the world's poorest people have, on the whole, risen faster than the rate of inflation in their respective home countries. Now any national consumer price index weights the evolving prices of the various commodities in proportion to their shares in national household consumption expenditure. Such a CPI will then give substantial weight to the prices of commodities that are irrelevant to poverty avoidance (e.g., airplane tickets, dish washers, chauffeur services). And such a CPI will correspondingly give less weight to the prices of essential commodities (such as basic foodstuffs) than would reflect the income share the very poor do and must devote to them. In a typical poor country, food may account for 40% of national household consumption expenditure but for 80% of the consumption expenditure of the very poor.
It is important to ask, then, whether in the period to be celebrated the prices of basic foodstuffs have generally, in the developing countries, risen in line with national CPIs or faster or slower. The Food Price Index of the UN Food and Agriculture Organization indicates that world market prices for food have risen much faster than inflation. The monthly and annual values for this index -- both nominal and inflation-adjusted -- can be downloaded from www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/. The annual values (first nominal, then deflated) are as follows:
2005 117.3 109.7
2006 126.7 116.6
2007 158.7 139.6
2008 199.8 164.6
2009 156.9 135.0
2010 185.3 158.3
2011 227.6 200.2
It is likely that this dramatic rise in world food prices has led to national food price increases well above national inflation rates in most countries. The Bank's method takes account of rising food prices only to the extent that foodstuffs figure in national household consumption expenditure. Insofar as food prices are much more important for the very poor than for people in general, the Bank's method understates the damage food price increases have done to the poor and thereby overstates the progress the poor have made.
That this point may be of some important is suggested by the "disconnect between poverty reduction and the persistence of hunger," which has finally been acknowledged in the latest Millennium Development Goals Report (2011, p. 11). While the World Bank numbers show a decline in $1/day (2005 PPP) poverty from 886.1 to 805.9 million in the 2005-08 period, the FAO's number show an increase in the number of chronically undernourished people from 848 to 963 million in the same period. This number of chronically undernourished people broke above the one-billion mark in 2009, for the first time in human history before reportedly falling back to 925 million in 2010.
Just for the record, I know Martin Ravallion and Shaohua Chen personally, have great respect for their work, and am deeply grateful for all the help they have given me over the years toward understanding their methodology. I voice my skepticism about their conclusions with profound respect, fully sharing their concern to present an accurate picture of how the poorest human beings have fared in recent years and decades. I would gladly join the celebrations if my reasons for skepticism were shown to be unsound.

We thank Thomas Pogge for his comments (and kind words). We have not yet released the methodological paper—overloaded with work as usual—so Thomas did not know what we had done to address the sharp rise in food prices in 2008. And (alas) he assumed the worst.
In fact we have taken account of the steep rise in food prices in 2008 by re-weighting the CPI whenever possible to accord with the food share in a neighborhood of the poverty line. We have done this for as many countries as these data are available, and where food price increases much faster than the national inflation rate.
Take China, for example. Average food spending is about 37% of total spending in urban areas and 43% in rural. But for the poor the figures are about 48% and 68% respectively. After re-weighting the CPI, the inflation rate for the poor is about 32% between 2005 and 2008, instead of 13% using the ordinary (unadjusted) CPI. If we used the latter then we would overestimate the extent of poverty reduction by 20+ million people.
Of course, for food producers there are also positive welfare effects of the higher food prices. But these are already taken into account through the consumption expenditure and income aggregates.
Shaohua Chen and Martin Ravallion

Many thanks for Shaohua and Martin for this clarification. And two quick follow-up questions:
1. For how many countries did you have the needed data to make the CPI adjustment you explain?
2. And how do you explain the "disconnect" between the rise in the number of chronically undernourished and the decline in the number of people in extreme poverty?

On your follow-up questions:
1. As I said, our forthcoming methodological paper will provide more detail on this point.
2. This is another matter. I don't know that there is some general "disconnect." But this has certainly been an issue in India, with the National Sample Surveys (the same surveys as used for poverty measurement, including by us) showing rising caloric undernutrition rates despite the falling overall poverty rates. Many explanations have been proposed, but the most convincing I have seen is in a paper last year for the FAO by Lisa Smith. Lisa identifies a number of data problems, but argues that the failure of the NSS to properly reflect food eaten away from home is the main culprit. Calories from such food are not picked up well in the NSS, even though the corresponding consumption expenditures are captured by the survey. And in a growing, and rapidly urbanizing, developing country such as India, food eaten away from home becomes more important. Lisa's cross-country comparisons are also interesting--again pointing to the importance of getting better measures of food eaten away from home. Bottom line is that, from what we know, I am inclined to believe the poverty measures for India more than the caloric undernutrition measures.